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Hungary’s currency begins recovering from coronavirus crisis losses

The Hungarian government and central bank moves prove effective at stemming currency losses

editor: REMIX NEWS
author: Tamás Péter Fellegi

The Hungarian currency has recovered most of the losses it suffered since the onset of the coronavirus pandemic in Hungary following a series of economic recovery measures announced by the Hungarian government and the country’s central bank.

On March 4, when the first coronavirus case was reported, the Hungarian forint traded at 334.37 against the euro from where it plummeted to about 370 forints to the euro by April 3.

With the country’s economic fundamentals healthy, the reason for the forint’s losses were not immediately apparent. The most likely cause is that seeing the interest rate differential between the forint and other regional currencies, some speculators — including George Soros — bet against the forint.

The U.S. Federal Reserve, however, eased its interest rates in March, followed by similar moves by the Czech and Polish central banks. This was still not enough to help the forint and other smaller European currencies. The Norwegian crown, for example, also hit a five-year low against the euro.

But after the Hungarian government announced a series of economic-boosting measures amounting to 20 percent of the country’s GDP and the central bank opened a new one-week deposit line to soak up excessive liquidity, the forint began a gradual recovery and at the time of writing stood at 351.404 against the euro, having had recouped 20 forints or two-thirds of the losses it suffered during the first month of the pandemic’s appearance in Hungary.

Analysts told Magyar Nemzet that in view of a series of forecasts indicating that Hungary is well-positioned to suffer the least economic fall, the national currency could regain the remaining part of the ground it has lost, provided it can break through the strong 350 EUR/HUF psychological barrier.